Gearing

Put simply, gearing is when an investment trust borrows money to make further investments. If markets rise in value, the trust can pay back the loan and retain the profit. Of course, if markets don’t improve as anticipated, the trust may not be able to cover the borrowing and interest costs, and will make a loss. If the Trusts's investments fall in value, gearing will increase the amount of this loss. The more highly geared the Trust, the greater this effect will be.

Managing gearing

Investment trusts have ways to manage long term gearing to alleviate some of the risks and to help conserve capital. Borrowings do not always have to be invested in equities. When the manager believes the outlook for equity markets is deteriorating, shares can be sold and the borrowings held either as bonds or in cash, or even in other kinds of assets like property where there may be less risk to capital. This effectively parks the borrowing until the manager believes the outlook is improving. The cost of the borrowings may be offset to a greater or lesser extent by the income received from the bonds and deposits.

If you would like to compare this trust's gearing to the gearing of any of the other investment trusts we manage, simply check the boxes to select a trust.

 Scottish Mortgage Investment Trust PLC

 The Monks Investment Trust PLC

 The Scottish American Investment Company P.L.C.

 Edinburgh Worldwide Investment Trust plc

 Mid Wynd International Investment Trust PLC

 The Baillie Gifford Japan Trust PLC

 Pacific Horizon Investment Trust PLC